Rs 40000 crore GST shortfall pauses rate cuts for now

NEW DELHI: Facing a shortfall of over Rs 40,000 crore in goods andservices tax collection, the Centre on Saturday suggested that there was a need to pause on rate cuts for the time being.

At a meeting of theGST Council, one of the states that had skipped the set of discussions on July 21 when rates on 88 products were slashed proposed that ministers from the states and the Centre should reduce the levy on cement from 28% to 18%, a move that is estimated to leave an annual dent of Rs 15,000-20,000 crore. This prompted Piyush Goyal, who was chairing the meeting, to suggest to ministers that there should be a pause, a term drawn from RBI, which uses it when interest rates are left unchanged, a senior government official told TOI.

Besides, sources said the meeting had been convened largely to discuss issues related to micro, small and medium enterprises, and a rate cut was not on the agenda. Goyal’s assertion stems from the assessment that the government is behind the asking rate onGST tax collections, partly because of the rate cuts and also because collections have not kept pace with the monthly target of around Rs 1 lakh crore.

West Bengal finance minister Amit Mitra estimated the shortfall at around Rs 43,000 crore during the June quarter. During this period, GST collections were estimated at Rs 2.86 lakh crore, while the budget target is around Rs 13.5 lakh crore or a quarterly mop up of Rs 3.36 lakh crore if spread equally across the four quarters. However, collections typically increase in the second half of the year coinciding with the festival season and the year-end dispatches.

Over the last 13 months, the Centre and states have already reduced rates on nearly a third of the 1,200 goods resulting in foregone revenue of Rs 70,000 crore. After the meeting, Goyal told reporters that Saturday’s deliberations focused on addressing the concerns of MSMEs and given the long list of suggestions two groups will look at the issues and a decision will be taken by a group of ministers headed by Shiv Pratap Shukla, junior minister in thefinance ministry.